Stocks edge up after takeover, GDP news

Stocks edge up after takeover, GDP news

	Published : Thu, 31 May 2007 20:50 By : Agencies Print this Story

NEW YORK (AP) - Stocks posted slight gains Thursday after a weak reading of the nation's gross domestic product muted Wall Street's enthusiasm over a new spate of acquisitions.

The Commerce Department's latest estimate of first-quarter GDP was 0.6 percent, lower than the average economist estimate of 0.8 percent and the 1.3 percent projected in April.

The fact that first-quarter growth has been the most sluggish since the last quarter of 2002, but that the Dow Jones industrial average has nonetheless surged more than 9 percent this year, caused some investors to pause.

'There's friction between those two numbers. That's why investors are a little bit worried, and why we are not hitting home runs every day,' said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors.

Still, most on Wall Street expect growth to pick up later in the year, and remain optimistic about the stock market thanks to the unrelenting wave of takeovers, which are on track to beat last year's record tab of $4 trillion.

On Thursday, banking company Wachovia Corp. said it would acquire A.G. Edwards Inc. for $6.8 billion in cash and stock to form the second-largest retail stock brokerage in the country. And payroll processor Ceridian Corp. said late Wednesday it will be bought out by investment firm Thomas H. Lee Partners LP and insurance provider Fidelity National Financial Inc. for about $5.3 billion.

In late afternoon trading, the Dow Jones industrial average gained 8.05, or 0.06 percent, to 13,641.13, after reaching a new trading high of 13,673.07.

Broader stock indicators also rose slightly.

The Standard & Poor's 500 index advanced 1.27, or 0.08 percent, to 1,531.50, after soaring to a record close Wednesday for the first time since March 2000.

The technology-dominated Nasdaq composite index added 9.74, or 0.38 percent, rising to 2,602.33.

Though GDP growth was slower than anticipated, the jobs picture and manufacturing sector looked strong. The Labor Department reported Thursday that the number of U.S. workers filing jobless claims dropped last week for the sixth time in seven weeks, and the Chicago Purchasing Managers said its manufacturing index rose to 61.7, higher than expected and up sharply from the April reading of 52.9. The purchasing managers index is seen as a precursor to the national report from the Institute for Supply Management, scheduled for release Friday.

Also, the Commerce Department said construction edged up by 0.1 percent in April, down from a 0.6 percent gain in March but better than economists predicted.

'Overall, the economic news was rather benign. What people are responding to are the market's own internal dynamics -- gravity,' said Alfred E. Goldman, chief market strategist at A.G. Edwards in St. Louis. 'We have good and bad in the fundamentals; basically we just have a market that's tired.'

Bonds fell on the strong manufacturing data. The yield on the benchmark 10-year Treasury note rose to 4.89 percent from 4.87 percent late Wednesday.

After Wachovia said it will buy A.G. Edwards, Wachovia slipped 33 cents to $54.22, and A.G. Edwards rose $10.61, or 13.8 percent, to $87.76.

In other corporate news Thursday, discount retailer Costco Wholesale Corp. and jewelry seller Tiffany & Co. released their financial results. Costco posted a fiscal third-quarter profit decline of 4.9 percent, while Tiffany reported a 15 percent rise in fiscal first-quarter profit -- indicating that consumer demand for big-ticket items remains robust.

Costco rose 15 cents to $56.68, and Tiffany fell 6 cents to $52.40.

Sears Holdings Corp. reported a solid 20 percent gain in earnings from the recent quarter, but said its U.S. store sales dropped. Sears fell $3.86, or 2.1 percent, to $179.39.

And Payless ShoeSource Inc., which recently said it was buying shoe seller Stride Rite, hit an all-time high after it reported a rise in fiscal first-quarter profit and better sales than analysts expected. Payless rose $1.18, or 3.4 percent, to $35.89.

The dollar was mixed against other major currencies, while gold prices rose.

Crude oil futures rose 66 cents to $64.15 a barrel on the New York Mercantile Exchange, after the U.S. government reported a surprising decrease in crude stockpiles but an increase in gasoline inventories. Retail gasoline prices are still high, but have eased back from record levels; the average U.S. pump price was $3.191 a gallon Thursday, according to AAA, down from a record $3.227 a gallon reached last week.

Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange, where volume came to 1.19 billion shares.

The Russell 2000 index of smaller companies was up 2.39, or 0.28 percent, at 845.74.

Chinese stocks rebounded Thursday after a sharp drop a day earlier. The Shanghai Composite Index rose 1.4 percent.

Japan's Nikkei stock average rose 1.63 percent. Britain's FTSE 100 rose 0.29 percent, Germany's DAX index rose 1.52 percent, and France's CAC-40 rose 1.02 percent.